8.1 What is Six Sigma?

Following on from our introduction to project management in
Module 7, we would like to turn to some more specific methods for improving business
practices that are currently popular in modern corporate environments, namely Six Sigma
and Kaizen.

With its roots in mathematical theory from the 19th Century, the practice of Six Sigma found initial
success within the telecommunications giant Motorola in the 1980s and has been reconfigured and
remoulded since then to become one of the 21st century's most popular and effective methodological
practices for improving customer satisfaction and improving business processes.

The objective at the heart of Six Sigma is to improve business processes by removing the causes of
errors that lead to defects in a product or service. One of the main advantages of its implementation
is the fact that its principles are universal and adaptable and can potentially be used across any
number of different industries, organisations and individual projects, making it appealing to many
types of business.

Six Sigma, in fact, is an extension of Total Quality Management (TQM), an approach that gained
success in the mid-1990s. However, it has a stronger focus on the more technical aspects of quality
than the human side of the equation. In short, Six Sigma can be described as a set of tools that, when applied properly, can maintain or increase quality whilst reducing business costs.

Fact

There are four levels of belt, or certification, in Six
Sigma, the highest being master black belt.

Source: Six Sigma Online

Some of the main aspects of Six Sigma

In an effort to bring operations to a standard compatible with Six Sigma - which is 3.4 defects for
every one million opportunities - continuous effort to get processes to the point where they are
capable of producing consistent and predictable results is needed.

Deconstructing the manufacturing process down to its essential parts, Six Sigma defines and
evaluates each step of a process, searching for ways to improve efficiencies in a business structure, improve the quality of the process and increase the bottom line profit.

In order to achieve this goal, thorough training of employees is needed. The level to which they will
be trained depends upon their involvement and role in the processes at hand, as there are different
certifications that can be worked towards and achieved.

For example

Green Belts are for beginners to the process, Black Belts are more experienced and often head up
individual projects and Master Black Belts are the most knowledgeable, looking for ways to apply Six
Sigma across a business structure in order to make improvements.

The ultimate goal is to improve every process to a “Six Sigma” level or better. A particular success
story is that of Motorola, who reported in 2006 that implementing Six Sigma had enabled them to
save $17 billion in cost and quality improvements.

Tools used in Six Sigma

There are two key methodologies used within Six Sigma, both of which are made up of five parts. These methodologies serve as summarised, step by step processes, which a business can apply to a
production process.

DMAIC

This method is used primarily for improving existing business processes:

* Define the problem and the project goals

* Measure in detail the various aspects of the current process .

*Analyse data to, amongst other things, find the root defects in a process
Improve the process

*Control how the process is carried out in the future

DMADV

This method is generally used to create new processes and new products or services:

*Define the project goals

* Measure critical components of the process and the product capabilities

*Analyse the data, develop various designs for the process, eventually picking the best one

*Design and test details of the process

* Verify the design by running simulations and a pilot program and then handing over the
process to the client

Some Six Sigma tools are common sense methods.

For instance

The Spaghetti Diagram is a floor plan that shows how things move back and forth through
manufacturing from one department to another. The messier and more complex that the diagram
looks, the more potential complexity and therefore wastage is expended, creating higher costs, delays and confusion.

In fact, lots of Six Sigma tools are taken from other project methodologies.The Work Breakdown
Structure (WBS) is a basic project management tool. Lean Methodology comes from Just-In-Time
(JIT) manufacturing. Flow charts come from chemical engineering and data processing.

Six Sigma training is an in-depth study of these tools and how to use them. Green Belt training
focuses on using the tools to support projects. Black Belt training focuses on managing the projects
to success.

There are also a variety of management tools used within Six Sigma.

Some of the commonly used ones are listed below:

* CTQ Tree - The Critical to Quality Tree diagram breaks down the components of a process that
produces the features needed in your product and service if you wish to have satisfied
customers

* Five Whys - This interesting approach asks various questions to get to the root cause of a
problem. The method is simple: simply state the main issue or problem at hand and then ask
the question “why”, breaking down the issue to its root cause. This can be a great way of
simplifying complex problems, in order to find obvious but often missed opportunities for
solution

*Root Cause Analysis - Similar to the Five Whys, this is a process by which a business attempts
to identify the root cause of a defect and then correct it, rather than simply correcting the
surface “symptom” of the problem

Essentially, the purpose of the many tools that make up Six Sigma is to streamline business
processes in order to produce the best products and services possible, with the smallest amount of
defects. Ultimately, you will choose the tools that best suit your style of business and the objectives
that you are seeking to achieve.

What Six Sigma is

Six Sigma as a methodology has many features which make it perfectly suited to operations
management, by eliminating errors and defects, reducing cost and saving time. Many feel that it is
particularly suited to more complex engineering and manufacturing processes, where companies
seek the quality benchmark of Six Sigma, but it can be easily adapted to all sorts of other product
and service industries.

What Six Sigma is not

Six Sigma can have a great number of benefits, as we have covered above. However, caution must
be exercised in its implementation, as it is not an easy answer to every problem that a business
faces.

For example
It is unlikely to be a quick or easy fix for a business, as the initial investment to train those involved
in its implementation and set it up is often very high, prior to seeing any returns.

On a similar note, it works optimally for organisations who adopt its practices on an ongoing basis, investing in its methodology for the long term, rather than just here and there in a reactionary
manner and as a response to problems that arise.

Activity 1

Estimated time: 15 minutes

Review the DMAIC tool for improving existing processes within the Six Sigma methodology. Think of an operational process in your own business and try to apply DMAIC to it, analysing each
step.

8.2 Six Sigma principles for operational improvement

Achieving success with Six Sigma is much more likely if you
carefully consider the principles below and build them into your implementation plan in a
structured manner.

Invest in thorough, top-down training

To begin with, it is important for the key senior executives in the business to receive training in its
approach, in order to fully understand its business value and how to support it at all stages of its
implementation .

Those whose role involves performing the tasks and functions likely to be impacted by Six Sigma will
obviously not only need training on the methodology, but should also be fully involved in its design, implementation and ongoing review, to ensure that the interventions chosen are fit for purpose and
workable.

Preferably, the business will also invest in training other employees whose roles are not directly
impacted by the process, in order to ensure consistency and clarity of thought and purpose across
the business as a whole. This intervention should help to embed the ways of working effectively for
the longer term.

Ensure the support of senior management

Any business process or intervention will not achieve desired success if it isn't backed fully by those
who are holding senior management positions in the business.There are two parts to this process. Firstly, the measures must have their genuine support, following a full cost-benefit analysis and
involvement in the plans of how to implement and roll it out to the business as a whole. Secondly, this support must be visible and consistent to the rest of the organisation, so that those working on
the front line can see the commitment, encouraging them to also get on board and understand that
the measures are believed in and invested in.

Make sure that you include customer feedback .

Ultimately, there is only one measure of success for a business and that's the view of the customers - the people who buy your products or services.

We talked in detail earlier in this course about ways to ascertain the views and preferences of your
target market to make sure that any business interventions suit their needs and wants. In this
process, this valuable information must be included.

Create an infrastructure to support success

Six Sigma is not a one-time fix. To maintain high quality production, the wider business must be able
to have an open dialogue about errors and defects and how to minimise and eliminate them.

Apply Six Sigma to short-term projects with specific goals

Going back to the principles that we talked about in the last module, An Introduction to Project
Management, Six Sigma will work best when applied to specific projects and goals/desired
outcomes, with each one having a clear overall objective. This may mean that you implement Six
Sigma at different times and in a phased approach across your business, prioritising where
necessary.

Focus on process improvement

An essential element of all quality management is to prevent, detect and reduce errors in the
process, to reduce defects in the product.

Clear and consistent methodology

Six Sigma is now such a widespread business methodology that it can differ somewhat between
businesses and industries. However, you should ensure that there is one clear, overall approach for
your organisation, adapted to each area of the business.

What are the key strengths of Six Sigma?

Implementing a Six Sigma programme can offer your business lots of benefits from an operations
perspective.

Here are some of its key advantages:

*Six Sigma addresses quality problems (errors and defects) and also cost problems (waste and
delay)

* The principal approach used by Six Sigma is to quickly identify and diagnose a problem, before
finding targeted solutions which are tailored to the issue at hand. Many proponents of the
approach feel that the solutions are more likely to work as they are specific and well
individualised

* Six Sigma offers a number of tools (as covered in the section above) to address problems, giving flexibility and individuality.

* An interesting feature of the methodology is that it is able to benchmark your company's
practices against industry standards, to enable you to compare yourself to your main
competitors

* Six Sigma is aligned with other cutting-edge management tools, such as continuous
improvement (Kaizen) and lean manufacturing, the main areas of which are also covered in
this course.

What are the potential drawbacks of Six Sigma?

Of course, Six Sigma isn't effective or appropriate in every situation and you must weigh up its
advantages and disadvantages, prior to deciding whether or not to implement it.

Here are some examples of when it may not be the right choice for your business:

* As it requires an initial investment and appropriate buy-in from senior managers, your
business must be in the right place, both financially and culturally, in order to ensure that the
changes can be effectively carried through and sustained to make a long term success of the
initiative

* If applied poorly or too uniformly across the board, some feel that it can add unnecessary and
rigid steps to processes, increasing bureaucracy and even reducing individual creativity
personalisation

* In addition, its customer focus may be taken to extremes, where internal quality control
measures that make sense for a company are not taken because of the need to conform too
rigidly to Six Sigma standards.

For example, an inexpensive measure that carries a risk of a
slightly higher defect rate may be rejected in favour of a more expensive measure that helps to
achieve Six Sigma, but adversely affects profitability

Take a Quick Recap Test
[viralQuiz id=19] .

8.3 Some common problems that Six Sigma can support

Here are some examples of goals Six Sigma can achieve.

Generating quality improvements

This is one of the biggest potential selling points of the approach and is probably best illustrated by
a workable example.

An organisation has a current product defect rate of 3 sigma, which means, of every 1,000,000
products produced, 97% are free from defects. The aim of using the Six Sigma diagnostic and
process improvement methods is that the number of defective products is reduced on an ongoing
basis. Generally, any early gains will be quick and relatively low cost, but the improvement will slow
and steady as more tools are used and interventions made. With fewer defects per million, the unit
cost goes down and customer satisfaction increases, potentially increasing your market share due to
lower prices and more favourable customer feedback.

Educing waste and costs in the short term

We have already discussed some of the benefits that lean management can bring to your business
and this approach integrates very well with Six Sigma.Elimination of waste at all stages of the
product lifecycle is the objective, including the waste of raw material, wasted time, wasted product
that must be sold at a discount and wasted space for warehousing and storage.

Reducing waste and costs in the long term

Unfortunately, Six Sigma initiatives can work out to be expensive in the early stages, especially for a
company that is not already using project initiatives. As a result, Six Sigma may not be the best
choice if the company has any issues with cash flow or liquidity. However, if the cost of initiating Six
Sigma can be met, then its continuous improvements in efficiency over time create greater cost
reductions, whilst maintaining product quality.

Implementing Six Sigma in your business

Your employees can be trained in Six Sigma to achieve certification in its methodology in the form of
the Belt process, as described above.

What's more, a business can implement Six Sigma in three different ways:

* You could hire the services of a consulting firm to get you started quickly and easily, solving
problems and training your internal team at the same time

* You could train existing staff in Six Sigma and have them implement the methodology
themselves

* You could convert the entire operation or company to Six Sigma, with universal training in
process improvement
Choosing your approach will depend on considerations such as cost, speed, expertise within the
business and to what extent you intend to use Six Sigma/how widespread it will be.

How to get the most out of Six Sigma

Although we have stated that it is usual for a business to accept that they will have to invest in Six
Sigma in the initial stages before seeing a tangible return, there are unusual cases whereby it can
actually provide cost benefits quickly. This is likely to occur when the Six Sigma is able to identify
and correct an obvious flaw in the production process, enabling the associated cost savings to pay
for the launch of the initiative.

The Six Sigma Benefit/Cost Curve

More commonly, an initial investment puts cost above benefit, or leaves very little additional net
revenue at first.

Following the crossover point, the benefits begin to be realised and the balance
shifts.

Over time, however, the benefit-to-cost ratio goes down, which is an inevitable by-product of the Six
Sigma methodology i.e. you should solve the biggest problems first, in order to maximise cost
savings and quality improvements quickly, thus, future benefits over cost will, inevitably, be less. It is therefore worth remembering that the process is all about continuous improvement, to change
processes for the better and continuously review them as circumstances change, to make sure that
they are as efficient as they can be.

Companies that use Six Sigma this way have the potential to become best practice centres, constantly improving their own performance ahead of everyone else.

Activity 2

Estimated time: 15 minutes

Brainstorm some of the pros and cons of using Six Sigma and Kaizen as project approaches in your
own business, trying to identify specific factors to your organisation that may impact to what extent
you use these processes, such as cost, culture, industry type, etc.

8.4 Continuous Improvement/Kaizen

The concept of an organisation never standing still and never
believing that it has reached or achieved all of its goals has been popular for some time, resulting in the growth of a way of thinking to maximise continuous and ongoing
improvement.

One approach to continuous improvement is known as Kaizen. Like Lean Management, it originated in Japan and the word translates to mean change (kai) for the
good (zen).

The main premise of Kaizen is that everything that is involved in the running of a businesscan
ultimately be improved. Whereas some organisations will be happy with a particular process as long
as it seems to be working and not causing any major problems, organisations that use Kaizen always
see an opportunity for improving it further.

This means that nothing is ever seen as a status quo - there are continuous efforts to improve, which
result in small, often imperceptible, changes over time. These incremental changes add up to
substantial changes over the longer term, without having to go through any major radical
innovation, which can cause disruption to the business.

It can be a much gentler and employee friendly way to institute the changes that must occur as a
business grows and adapts to its changing environment.

Fact

Masaaki Imai(born in 1930) founded the Kaizen
Institute Consulting Group, to help western companies introduce the concepts, systems and tools of
Kaizen.

Source: Kanbanchi.com

Understanding the Kaizen methodology

Kaizen is less of a specific business tool and more of a conceptual philosophy. Its key thinking can be
found in many different process improvement methods, ranging from Total Quality Management
(TQM), to Six Sigma as we have discussed - and even simpler approaches such as the use of
employee suggestion boxes to facilitate improvement.

Kaizen believes that all employees are responsible for identifying inefficiencies and potential
improvements, with no hierarchy in terms of who can make suggestions and implement changes for
the benefit of the business.

From an operations management perspective, Kaizen aims to make improvements in the
following key operational areas:

* More satisfied employees- this is because they have a more direct impact on the way things
are done

* Less waste- inventory is used more efficiently, as is the workforce

* Improved retention- satisfied and engaged people are less likely to leave the company

* Improved competitiveness- increases in efficiency tend to contribute to lower costs and higher
quality products, which can increase market share

* Improved consumer satisfaction- this results from higher quality products, with fewer faults
Improved commitment- employees benefit from more of a stake in their job and are more likely
to be committed to doing a good job

*Improved problem solving- looking at processes from a solutions perspective allows employees
to solve problems continuously
Improved teams- employees work together to solve problems, helping to build and strengthen
teams

Tips for using Kaizen successfully in your business

Below are some ideas on how to plan and implement Kaizen style thinking in your business or team:-

Keep an ideas log of things that seem inefficient, or that you'd like to improve and encourage
members of your team to do the same. You are likely to find that jotting ideas down as they come to
you is much more effective than trying to recall them at a later date.

Spend some regular, dedicated time identifying areas where there is waste in the way you or your
team is working. Use your ideas log as input, but also think about the wider picture and your overall
ways of working. Consider how waste could be minimised and how things could be improved.

Plan outwhenyou are going to make these changes. You need to strike a balance between getting on
with making the improvements immediately (so that the area of waste doesn't become a bigger
problem) and ensuring that your team are on board with and ready for the changes, not seeing them
as just another short-term change which won't be sustained.Change overload in a team can
sometimes have a more detrimental effect than not making the change in the first place.

If the changes affect others, be sure to consult them about the new arrangements and listen to their
thoughts and suggestions.

Assignment

More Project Methodologies in Operations Management

Time: 30+ minutes

Hopefully, you took in as much of the information in this module as possible.

Module Summary

Following Module 7 where we took an introductory look at project management, we have delved
deeper in this module to look in some more detail at two particular project methodologies which
have achieved great renown and success across the modern business world - that of Six Sigma and
Kaizen.

We began with a definition of Six Sigma, looking in detail at its main principles and what it stands
for as a concept, including its growth over the last couple of decades.

We covered, in some detail, some of the most commonly used tools that form part of the
methodology, including DMAIC, DMADV and the Five Whys and discussed the fact that the
circumstances of your own business will largely dictate which tools are most appropriate for you to
use.

Following this, we covered some of the main advantages and disadvantages of using Six Sigma as an
approach and some of the situations that you are most likely to achieve success in, along with some
great tips for its implementation. Secondly, we looked at the growth of Kaizen or continuous improvement as a project concept, giving
you its purpose and main principles, as well as some advice on how to implement it in your
organisation.